Here is a good summary of how the proposed tax plan benefits the Trump family. The way that real estate properties are singled out for reduced taxation is reprehensible. Seth Hanlon’s article for the Center for American Progress (below) provides details.
- The “passthrough” tax repeal means that private partnerships and sole proprietors that pay taxes at 39.8% would be taxed at 25%. Trump Corp. and Kushner properties fall into this category.
- Taxes on inherited estates larger than $10 million will no longer pay any tax on inheritances. This actually does not benefit Trump but it does benefit his family.
- Taxes on like-kind exchanges on properties are repealed on real estate properties. A clear boon for the president.
- Limitations on interest deductions for corporations are capped in this bill EXCEPT on real estate properties. Trump wins again.
- The alternative minimum tax is repealed. Trump may never have to pay taxes again!
Seth Hanlon, Center for American Progress, 11/5/2017
The Republican tax bill looks like it was written by Donald Trump’s accountants and tax lawyers, and I’m not even joking. It would be hard to design a tax plan more friendly to billionaire real estate magnates like the Trumps and Kushners of the world.
Where to begin? How about the “Trump Loophole” – the special low tax rate for wealthy “passthrough” owners. (Sec. 1004 of the bill.) Passthrough businesses are entities like partnerships, LLCs, and S-corps that don’t pay corporate tax. The Trump Organization is comprised of 500+ passthrough entities. The Kushner Companies are also structured as LLCs.
Currently, millionaires and billionaires pay a 39.6% rate on passthrough business profits. Sec. 1004 of the bill cuts that rate to 25%. We’ve estimated that Trump could get a $23M annual tax cut, & Jared Kushner $6-17M, from this new loophole.
All told, it’s a $450 BILLION tax cut, overwhelmingly for millionaires. (Could be more if the loophole is gamed more than JCT expects)
Next, we go to Section 1602 of the House Republican bill, which repeals the tax on multimillion-dollar estates. Of course it’s not that surprising that a GOP tax bill would repeal estate tax. (which applies only to the wealthiest 1 in 500 estates). That loophole allows people to accumulate huge amounts of wealth & never pay income taxes on it during their lifetime. Now their heirs will inherit tax-free as well.
Even when G.W. Bush repealed the estate tax (temporarily), he reformed “stepup” to ensure huge fortunes wouldn’t go untaxed forever. This Trump-GOP bill is much more extreme, in that respect. All gain, no pain, for wealthy heirs. For example, section 3303 repeals “like-kind exchanges,” which allow people and companies to swap assets w/out paying capital gains tax. In combination with “stepup,” like-kind exchanges can let real estate developers avoid cap gains tax on their properties indefinitely. That’s a sweet deal for the Real-Estate-Developer-in-Chief.
Section 3301 also limits the deductions that businesses can claim for interest payments. But what do we have here? Another special exception for real estate businesses! They’re carved out of the new limits. Remember, Donald Trump called himself the “King of Debt.” Trump Org. interest deductions are untouched. And I can think of another RE developer who’s prob relieved he can still write off interest on his large debts. (Kushners)
Finally, we come to section 2001, repealing the Alternative Minimum Tax. The AMT is a backstop to the regular income tax, ensuring that high-income people pay at least some tax. We’ve seen one year of Donald Trump’s tax returns, from 2005. That year, he paid $31 million in AMT. Without the AMT, he would have paid a tax rate of less than 4% that year. AMT is repealed in this bill.
So, to sum it all up, I don’t know how this bill could be friendlier to Donald Trump, while raising taxes on many middle-class families. The ultimate outrage is that the Republican members of the Ways & Means Committee, which will be voting on this bill this week, have repeatedly blocked efforts to obtain Trump’s tax returns. The Committee has unilateral power to obtain Trump’s tax returns – but the majority Repubs have voted down the Dems’ attempts to do so. They’re now rushing fwd on the bill w/out a single hearing to scrutinize special deals for ppl like Trump or impact on regular fams.